XRP and Solana ETFs: Are They Boosting Corporate Tokens at the Cost of Decentralization?

Wall Street’s swift move to endorse alternative cryptocurrency exchange-traded funds (ETFs) this October, referred to by some as “Cointober,” is highlighting the increasing institutional interest in crypto. However, this trend raises vital questions about the relationship between decentralization and institutional endorsement.

Cointober Frenzy

A report by Alphractal indicates that 59% of institutional investors plan to devote over 5% of their managed assets to cryptocurrencies by 2025, a significant increase from under 2% in 2023. This shift could signal as much as $2.4 trillion entering the crypto space.

Nevertheless, Alphractal warns that these new ETFs may be legitimizing tokens controlled by corporations instead of providing equitable access to decentralized networks. Their analysis reveals a concentrated grip on major altcoins; for example, Ripple Labs retains 45-51% of the total supply of XRP, with a large portion locked away in escrow.

In addition, the governance of Solana remains closely linked to Solana Labs and the Solana Foundation, with these entities holding about 40% of unused tokens, while venture capitalists and insiders manage nearly 50%. In contrast, Ethereum has a more decentralized structure but still relies on the Ethereum Foundation for protocol management. Unlike Bitcoin, which has no central authority, these altcoins retain corporate governance frameworks that enable substantial stakeholders to influence decisions and operations.

According to Alphractal’s extensive research, which compiled data from over 1,000 different metrics, the trend of institutional engagement is closely aligned with these patterns of centralized governance. Their analytics suggest that institutional adoption is rising rapidly in stability, even within altcoins under concentrated control.

The approval timelines for ETFs have drastically declined from 240 to 75 days, which may be expediting institutional acceptance of these regulated tokens. Alphractal concludes that this mechanism is turning access to corporate-led blockchain assets into a formal investment vehicle, rather than offering genuine decentralized involvement.

Control and Profit

These observations resonate with critiques shared by Vandell Aljarrah, co-founder of Black Swan Capitalist, who has previously voiced strong criticism against XRP ETFs. He warned investors against confusing these ETFs with real crypto ownership, emphasizing that they do not serve to democratize access or enhance practical utility. Instead, he positioned them as tools primarily focused on control and profit. While holding native XRP enables one to engage in various network functions, ETFs merely provide price exposure, stripping investors of the ability to manage or transfer their tokens themselves.

Aljarrah’s assertions bring to light a critical compromise where investors might secure Wall Street-regulated exposure to XRP without truly benefiting from the token’s inherent functionalities.